Russia cuts off gas to Ukraine

The price dispute forces the country to tap its gas reserves to get through winter.

January 2, 2006|By Alex Rodriguez, Chicago Tribune

MOSCOW -- Russia's state-owned natural-gas monopoly shut off gas to Ukraine on Sunday, a decision justified by Moscow as the result of a price dispute but viewed by many as Russia's harshest retaliatory strike yet against Kiev's post-Orange Revolution, pro-West leadership.

The shutdown deprives Ukraine of a third of its natural-gas supply and forces it to tap its gas reserves to get through the rest of winter.

The decision by Gazprom, Russia's state-owned energy giant, could also jeopardize natural gas that Russia supplies to western Europe via Ukraine, though Gazprom tried to reassure European leaders Sunday that their shipments would continue uninterrupted.

Ukraine had been paying $50 per thousand cubic meters of gas, a discounted tariff that reflected Gazprom's use of a pipeline through Ukraine to transport natural gas to Europe. Gazprom initially sought a price increase to $160, but in mid-December the Russian energy giant ratcheted up its demand to $230.

Ukrainian President Viktor Yushchenko refused to pay that price, calling it "a provocation." Russian President Vladimir Putin suggested Saturday that a shutdown could be averted if Ukraine agreed to begin paying the new $230 rate later, in April.

Ukraine refused.

Gazprom officials said their demand merely reflected market prices paid by other European customers.

However, many analysts said Gazprom's tactics were driven by Russia's anger with Yushchenko's government, which is forging strong ties with the European Union and NATO and distancing itself from Moscow's influence.